OIL AND GAS:

Despite $8.6B ruling, long road remains for Chevron pollution case

When a court in Ecuador ruled yesterday that Chevron Corp. should pay at least $8.6 billion in damages for pollution in the Amazon jungle, it opened up a new chapter in a case that has already been contested for 18 years.

It is by no means certain that the plaintiffs in Ecuador will see one penny of the damages awarded, which experts are saying is the second biggest environmental case of all time after last year's Deepwater Horizon oil spill in the Gulf of Mexico.

In that case, BP PLC has already agreed to pay $20 billion in compensation before various other civil claims, including one filed by the government, have even been litigated.

But it may be that, at least in terms of the disputes over damages, the Ecuador case will have more in common with the 1989 Exxon Valdez spill in Alaska, which bounced around the courts for 20 years.

"It's going to be a real battle and will go on for a while," said Robert Percival, an environmental law professor at the University of Maryland School of Law.

The Ecuadorean plaintiffs first filed suit in 1993 over alleged pollution in the Lago Agrio area during the 1970s and 1980s.

Chevron has vowed to fight every step of the way in the Ecuador case, both in Ecuadorean courts on appeal and internationally, where it is seeking to prevent the plaintiffs from enforcing the ruling.

Casting a shadow over the process are Chevron's allegations that the entire case is an extortion racket.

Chevron, which took on the litigation when it acquired Texaco Petroleum Co. in 2001, has claimed that the issue was settled when the Ecuadorean government entered into an agreement with Texaco, which was part of an oil consortium that worked alongside the Ecuadorean government-controlled company, Petroecuador.

As part of the global effort to undermine the plaintiffs, the company filed a federal racketeering suit against the plaintiffs' legal team and other supporters earlier this month (Greenwire, Feb. 2).

A federal judge in the Southern District of New York, Lewis Kaplan, subsequently issued a temporary restraining order that bars the plaintiffs from immediately seeking to enforce a favorable judgment outside of Ecuador (Greenwire, Feb. 9).

The restraining order expires on Feb. 22, but Kaplan is due to decide before then whether to impose a more permanent preliminary injunction.

The plaintiffs are expected to look beyond Ecuador to enforce the ruling because Chevron does not have assets there.

Ultimately, the outcome "will be based on whether the courts in various countries where Chevron has assets agree with Chevron that the judgment was the product of fraud," Percival said. "That's an open question."

Chevron has also been seeking to intervene directly with the government of Ecuador. Last week an international arbitration panel based in the Netherlands issued an order asking Ecuador not to allow the court to immediately enforce a judgment (E&ENews PM, Feb. 11)

Ecuador responded that, under Ecuadorean law, the ruling could not be enforced while an appeal was pending, regardless of what the plaintiffs had in mind.

"This order requests ... Ecuador to take measures that are already recognized by Ecuadorian law," said a statement issued by Ecuador's lawyers on behalf the country's attorney general. "No first-instance judgment that is on appeal and therefore has not been enforced, can be recognized or enforced in Ecuador or abroad."

The arbitration between Chevron and Ecuador has been ongoing since 2009 after the oil company alleged that Ecuador had violated bilateral trade agreements between it and the United States.